Welcome to Texas: Personal Jurisdiction Over Non-Resident Directors of Texas Corporations
The Dallas Court of Appeals recently all but held that a non-resident officer and director of a Texas corporation is subejct to personal jurisdiction in Texas. After reviewing the law on personal jurisdiction, the court decided that there was no general jurisdiction over the defendants who were California residents.
Turning to specific jurisdiction, the court addressed whether the defendants' ongoing business relationship between Texas and California and the dispute over control of a Texas corporation constituted doing business in Texas. The court agreed with the reasoning of a Fourth Circuit case:
Excellent reasons exist for alowing a State to assert jurisdiction over non-resident directors of domestic corporations. A chartering state has a strong, even compelling interest in providing a forum for redressing harm done by corporate fiduciaries, harm endured principally by a resident of that State, the corporation. . . . Given the high degree of regulation over corporate fiduciaries, the State's interst in providing a convenient forum for a derivative suit charging malfeasance or nonfeasance of a director cannot be overemphasized.
The court hedged its bet slightly by acknowledging the lack of authority from the Texas Supreme Court or state legislature on the subject. Thus, the court went on to find that the defendants' other contacts were sufficient to support personal jurisdiction. One caveat, the plaintiff in the case, as well as the other shareholders were Texas residents. Would the analysis change if all of the shareholders, officers, and directors were non-residents? The court's opinion in TexVa, Inc. v. Boone can be found at this link.
Readers note: This issue is currently before the Texas Supreme Court in the case of Kelly v. General Interior Constr., Inc. Readers can go to Don Cruse's Texas Supreme Court blog, or its companion site, docketdb.com and find more infornation about that case here and here.
